Policy and Economy

Top ten highest-paying college majors

2010-03-15T06:19:00.005-04:00

According to the National Association of Colleges and Employers, these are currently the ten highest-paying college majors for new college graduates:

Petroleum Engineering — $86,220
Chemical Engineering — $65,142
Mining & Mineral Engineering (incl. geological) — $64,552
Computer Science — $61,205
Computer Engineering — $60,879
Electrical/Electronics & Communications Engineering — $59,074
Mechanical Engineering — $58,392
Industrial/Manufacturing Engineering — $57,734
Aerospace/Aeronautical/Astronautical Engineering — $57,231
Information Sciences & Systems — $54,038

In general, technical majors pay the most. Finance-related majors (e.g. finance, accounting, economics, business) are the second-highest-paying group of majors. Health and natural sciences come next. Liberal arts, agriculture, and education majors pay the least. A technical undergraduate degree combined with an M.B.A. pays extremely well. For more on this topic, see here.

Fareed Zakaria criticizes ObamaCare

2010-03-14T06:58:00.005-04:00

CNN's Fareed Zakaria echoes one of my main complaints about ObamaCare:

CNN: What's your view of the health care legislation Democrats may pass in the next week?

Zakaria: My own feeling is it's a missed opportunity — while it would be great to expand coverage, it doesn't fundamentally reform a broken health care system. We have a system that has out-of-control costs, where there's a huge incentive for the overconsumption of costs by the consumer and oversupply by the producers. Patients are willing to consume more health care services than they need, and doctors and hospitals are willing to supply more health care services than are required ...

We consume many more tests, we do many more interventions, all of which are much more costly and at the end of the day, we don't live longer, we don't have better outcomes on virtually any disease.

By the way, his most recent book, The Post-American World, is outstanding. I've recently become a huge Fareed Zakaria fan.

For more on the problem of high health care costs, see my blog posts here, here, here, here, and here. Or, you could just click on the health care tag below to read all of my health care–related blog posts.

Unemployment rate by level of education

2010-03-13T06:08:00.003-05:00

In case you can't read the legend, the education categories are:

Less than high school diploma
High school graduate, no college
Some college or associate's degree
Bachelor's degree or higher

Click on the graph to see the full-sized version:

I find it interesting to see that the typical unemployment rate for someone with a college degree is only about 2-3%.

From Calculated Risk.

Quote of the day

2010-03-12T11:19:00.004-05:00

From Megan McArdle:

Green jobs have become the ginseng of progressive politics: a sort of broad-spectrum snake oil that cures whatever happens to ail you.

Real environmentalism would encourage people to use less energy, therefore there would likely be fewer jobs in the energy sector.

Smart energy policy would simply raise the cost of fossil fuels via a carbon tax or cap and trade. There should be no subsidies for renewable energy, because energy subsidies encourage people to waste energy.

Tahir ul-Qadri: Terrorists are kafirs (unbelievers)

2010-03-06T06:39:00.004-05:00

Islamic scholar Dr. Tahir ul-Qadri has issued a 600 page fatwa declaring that terrorists are unbelievers:

A fatwa, or religious ruling, issued this week is roiling theological waters after it took aim at those notorious for targeting others: terrorists.

The anti-terrorism fatwa by renowned Muslim scholar Muhammad Tahir ul-Qadri pulled no punches, declaring that terrorism was "haraam," or forbidden by the Quran, and that suicide bombers would be rewarded not by 72 virgins in heaven, as many terrorist recruiters promise, but with a suite in hell.

Qadri, the founder of the Minhaj-ul-Quran International, an Islamic movement with centers in 90 countries, told a news conference in London, England, on Tuesday that his decree categorically condemns terrorism and suicide bombings in the name of Islam.

"Until now, scholars who were condemning terrorism were conditional and qualified what they said," Qadri said in a phone interview, noting that his 600-page ruling left no room for interpretation. "I didn't leave a single, minor aspect that, in the mind of radicals or extremists, can take them to the direction of martyrdom."

The 59-year-old Pakistani scholar called his fatwa an "absolute" condemnation, going as far as to label the terrorists themselves "kafirs," a term in the Quran meaning "unbeliever." ...

"This is not an academic or an intellectual argument alone. This is a theological argument, based in the Qur'an and Sunnah [practice of the Prophet]," Ahmed said. "What it provides are easily available argumentation and proof for the millions of preachers across Pakistan, who can, in turn, incorporate this into their weekly sermons."

Information directly from the source can be found here.

Basicland: An economic parable by Charlie Munger

2010-03-02T13:45:00.002-05:00

A parable by Charlie Munger, Warren Buffett's partner in crime.

The cost of diamonds per carat

2010-02-20T07:30:00.012-05:00

Here's little graph I whipped up to show the per carat price of engagement ring diamonds, for each carat size. I should emphasize that this graph does not show the price per diamond at a given size, it shows the price per carat for a given-sized diamond. So, for example, if a 4 carat diamond costs $13,250 per carat, the total diamond cost would be 4 × 13,250 = $53,000.

Diamonds do not cost a constant price per carat. Because large diamonds are far rarer than small diamonds, a larger diamond costs more per carat than a smaller diamond. That is what this graph shows.

To come up with this graph, I used prices from Zales.com. I measured prices of round diamonds, because they are the most common shape. I focused on a cut, color, and clarity that appears nearly perfect to the unaided human eye. I looked at diamonds that had a clarity of SI2 or better, a color of I or better, and a cut of Good or better. To minimize the potential impact of price outliers, the graph measures the per carat price of the second cheapest diamond at a given carat size.

Apparently, the median size of newly-purchased engagement ring diamonds today is 1 carat. However, if someone is considering springing for a slightly larger rock, the actual price per carat of a 1.5 carat diamond is slightly cheaper than the trend line says it should be—at least at Zales.

For those on a budget, the half carat diamond is by far the best deal of all the diamonds measured by this graph. Not only do you buy half as much diamond as someone buying a 1 carat diamond, you also spend less than half as much per carat, resulting in a diamond price that is less than a quarter of the price of a 1 carat diamond.

January 2010 unemployment statistics

2010-02-06T06:11:00.004-05:00

The official unemployment rate declined in January. It's still too early to tell for sure, but so far it looks like we're seeing the declining unemployment that occurs after a typical recession, rather than the "jobless recovery" of the previous two recessions. (The typical pattern after a recession is for the unemployment rate to decline. That pattern was broken by the previous two recessions when the unemployment rate rose for quite a while after the recession had ended.)

Payroll numbers suggest we lost 20,000 jobs in January. That's far better than the pace a year ago, but we need 100,000-200,000 job gains just to keep up with population growth. This graph shows the month-over-month change in payrolls as measured by the U.S. Bureau of Labor Statistics:

Here is the month-over-month change in payrolls as measured by Automatic Data Processing, a private payroll-processing company. I'm starting to favor the ADP data over the BLS data due to lower month-to-month volatility. As a reminder for conspiracy theorists, the ADP data does not come from the government.

Some economists consider aggregate weekly hours worked as the best measure of both unemployment and underemployment. For those of you who favor the U6 measure of the unemployment rate over the official rate because it takes underemployment into account, you should love the Aggregate Weekly Hours Index. Here we see that the pace of average weekly hours worked is showing continuing improvement, but it's still below zero:

Finally, some economists like to look at weekly initial unemployment claims because it is updated more frequently than the monthly statistics above. This graph shows the year-over-year percentage change. Notice it's currently below zero, which is a good sign.

For those of you on the east coast, enjoy the snow this weekend.

U6 is not the real unemployment rate

2010-01-30T06:07:00.000-05:00

Cato says U6 is not the "real" unemployment rate.

I think U6 is attractive to permabears and "progressives" because it fits their pessimistic view of the world.

I don't think it matters whether you use U1, U2, U3, U4, U5, or U6, because they move in lock step with each other. Just pick one and stick with it. U3 is the official unemployment rate and is most widely reported.

What matters is not the unemployment rate per se, but the unemployment rate compared to the natural rate of unemployment (i.e. NAIRU, "full employment"). For U3, the natural rate of unemployment is about 5%, so when it's above that we know things are bad. If U3 falls much below 5%, inflation cometh. I don't know what the natural rate of unemployment is for U6, and I bet most people who insist on using it don't know either.

Is the economic stimulus effective?

2010-01-24T06:48:00.002-05:00

Comparing the Obama administration's projections for unemployment when President Obama proposed the stimulus bill with the unemployment rate we have actually experienced, it's hard to say definitively that the economic stimulus package has "saved or created jobs."

Dark blue: projected unemployment rate with stimulus.
Light blue: projected unemployment rate without stimulus.
Red: actual unemployment rate.

Graph source.

The fed funds rate: Too low for too long?

2010-01-23T06:45:00.000-05:00

Here's an interesting graph. It shows the fraction of the time in each decade that the real fed funds rate was negative, i.e. the nominal fed funds rate was below the inflation rate. In the 1970s, we had significant consumer price inflation. In the 2000s, we had a credit bubble.

Adam Smith's "invisible hand" in context

2010-01-17T05:45:00.000-05:00

Princeton University economics professor Alan Blinder puts Adam Smith's concept of the "invisible hand" in context:

When economists first heard Gekko's now-famous dictum, "Greed is good," they thought it a crude expression of Adam Smith's "Invisible Hand"—which is one of history's great ideas. But in Smith's vision, greed is socially beneficial only when properly harnessed and channeled. The necessary conditions include, among other things: appropriate incentives (for risk taking, etc.), effective competition, safeguards against exploitation of what economists call "asymmetric information" (as when a deceitful seller unloads junk on an unsuspecting buyer), regulators to enforce the rules and keep participants honest, and—when relevant—protection of taxpayers against pilferage or malfeasance by others. When these conditions fail to hold, greed is not good.

Greed is a natural human vice, just like aggression. As much as we may try, we cannot get rid of them because they are part of human nature. But just as sport channels aggression into productive use, free enterprise does the same for greed. Free enterprise is only productive when its goal is to benefit consumers. When it becomes acceptable to screw consumers (or taxpayers) in the quest for wealth, the benefit of free enterprise is entirely lost.

Greed is not good. It is the productive work and investment we do as a result of our greed that is good.

Haiti's earthquake: How you can help

2010-01-16T05:07:00.002-05:00

I encourage readers to help the Haiti earthquake relief effort. For those who want to donate, Charity Navigator has a list of recommended charities.

December 2009 jobs data

2010-01-10T07:28:00.001-05:00

Pundits are making a fuss about the fact that official December job losses increased from November's unbelievable numbers. Monthly job losses still show a longer-term gradual decline. (Source.)

Perhaps looking at ADP's private job loss numbers does a better job of putting the trend in perspective:

The official unemployment rate remained unchanged at 10.0% in December:

The year-over-year percent change in aggregate weekly hours worked shows an upward trend, although it's still below zero:

The year-over-year percent change in initial unemployment claims is below zero and continuing to improve:

So, while the widely-reported official data didn't look so good in December, other data shows the recovery is continuing.

A reminder for conspiracy theorists: The ADP data (i.e. the second graph) does not come from the government.

The key to talent

2010-01-01T14:07:00.002-05:00

Updated historical home price graph

2009-12-28T06:20:00.003-05:00

For those who are interested, I have finally gotten around to updating my home price graphs. The national graph now has a new feature: pre-bubble trend lines.

Click on the graph to view the full-sized version.

PETA is sexist

2009-12-22T07:05:00.000-05:00

People for the Ethical Treatment of Animals (PETA) degrades women. Ha!

Money is the root of much good

2009-12-18T06:52:00.007-05:00

Despite the widespread belief that "money is the root of all evil," The Economist points out that money's virtues outweigh its vices:

There is a tendency to look back on the pre-industrial era as an idyll. But if you think life was great before sordid commericalism appeared, you should try being a peasant. Life was a combination of back-breaking work, few human rights, illiteracy, short life expectancy and little chance for advancement (especially for women). It is no coincidence that all these things have improved in our more sophisticated economy. ...

Societies that have destroyed their money, like Zimbabwe, have not moved into a post-materialist world; they are full of famine, disease and brutality.

Most people recognize that it is better to be wealthy than to be poor. However, far too many people think of the world's wealth as being fixed—that if you have more money, it forces me to have less. That is not the way the economy works. Humanity grows wealth over time. The more productive we are—through harder work, better education, greater innovation, and more efficient use of resources—the faster the economy grows and the wealthier we all become.

Without money, wealth, and economic growth, we would not have refrigeration for food, airplanes for travel, running water for sanitation, or computers for learning. Man's desire for money, and his willingness to employ his productive resources in order to obtain it, gradually makes the world a better place.

Public schools: Elites vs. the middle class

2009-12-12T09:49:00.007-05:00

Another reason to favor school choice over the public school monopoly, from Wikipedia:

Randall Collins contributed the idea of credentialism to the study of class-based differences in educational attainment. Collins maintains that public schools are socializing institutions that teach and reward middle class values of competition and achievement. Anglo-Protestant elites are selectively separated from other students and placed into prestigious schools and colleges, where they are trained to hold positions of power. By teaching middle-class culture through the public education system, the elite class ensures a monopoly over positions of power, while others acquire the credentials to compete in a subordinate job market and economy. In this way, schools of medicine, law, and elite institutions have remained closed to members of lower classes.

Thus, as I interpret this paragraph, the hypothesis says prestigious private schools teach how to lead, while the public school monopoly teaches how to serve.

How to attain social status

2009-12-10T05:41:00.007-05:00

Scientific American has an interesting article on what causes people to have or lack social status:

Recent work by social scientists has tackled the topic, elucidating behavioral differences between low-status and high-status individuals, and the methods by which those at the bottom of the totem pole are most successful at climbing to the top. ...

Low-status people are much more sensitive to being socially rejected and are more inclined to monitor their environment for threats. Because of this vigilance toward protecting their sense of self-worth, low-status individuals are quicker to respond violently to personal threats and insults. ...

Those who are effective in attaining status do so through behaving generously and helpfully to bolster their value to their group. In other words, low-status individuals’ aggressive and violent behavior is precisely the opposite of what they should be doing to ascend the societal totem pole. ...

People afford greater status to individuals who donate more of their own money to a communal fund and those who sacrifice their individual interests for the public good. Demonstrating your value to a group—whether through competence or selflessness—appears to improve status. Anderson and Aiwa Shirako suggest that the amplifier for this effect is the degree to which one has social connections with others. ...

They showed that individuals who behaved cooperatively attained a more positive reputation, but only if they were socially embedded in the group. Those who behaved cooperatively, but lacked connections went unnoticed. ... Those who were selfish and well-connected saw their reputation diminish. ...

The sum of these findings can begin to explain the troubled circumstances of those lowest in status. ... Instead of ingratiating themselves to those around them – this is the successful strategy for status attainment – low-status individuals may be more prone to bullying and hostile behavior, especially when provoked.

So, to attain a high socioeconomic status, in addition to getting an advanced degree in a high-paying field, you should be helpful to those around you.

The November 2009 unemployment rate declines

2009-12-05T05:45:00.000-05:00

The economy keeps getting better (or less bad). The unemployment rate actually fell in November, down to 10.0% compared to 10.2% a month earlier:

The year-over-year percent change in initial jobless claims has fallen below zero, which means employed workers are safer than they were a year ago:

November's month-over-month change in nonfarm payrolls was just about zero, the best it's been since December 2007:

Compare the above graph with a graph of ADP's numbers.

The year-over-year percent change in aggregate weekly hours worked is rising:

Permabears must be growling at the improving data.

November 2009 monthly job loss numbers from ADP

2009-12-03T07:16:00.002-05:00

According to the ADP Employment Report, the month over month rate of job losses continued to decline in November. This graph shows the number of job losses in thousands:

Here are ADP's comments on the numbers:

Nonfarm private employment decreased 169,000 from October to November 2009 on a seasonally adjusted basis, according to the ADP National Employment Report®. ...

November was the eighth consecutive month during which the decline in employment was less than in the previous month. Although overall economic activity is stabilizing, employment usually trails economic activity, so it is likely to decline for at least a few more months.

Keep in mind that we need 100,000-200,000 job gains each month just to keep up with population growth.

Prof. Brent White: Walk away

2009-12-01T05:51:00.001-05:00

A law professor encourages people to walk away from their homes:

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.

That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

White argues that far more of the estimated 15 million American homeowners who are underwater on their mortgages should stiff their lenders and take a hike. ...

Better yet, you can default "strategically." Buy all the major items you'll need for the next couple of years — a new car, even a new house — just before you pull the plug on your current mortgage lender.

Scenario #1: You walk into a bank and take a bunch of money that doesn't belong to you. This is called theft.

Scenario #2: You take out a loan, promising to pay it back. Then, after you have the money, you decide not to pay it back. How is this not also theft?

I can completely understand not paying back a loan if you lose your job and are unable to pay back the loan. I can also understand if you get sick and end up with huge medical bills that make it impossible to pay back a loan. I can even understand not paying back a loan if the bank deceived you regarding what your payments would be.

However, if you decide not to pay back the loan simply because you overpaid for your house, then I consider that the moral equivalent of theft.

Keep in mind that being underwater doesn't mean you can't afford the monthly payments. It just means that the value of your house has fallen by more than the amount of your down payment (and any subsequent principal payments). A person who stiffs their lender because their investment didn't turn out as expected is scum. Just because you can steal from a bank doesn't mean you should steal from a bank.

U.S. economy in sustained, gradual recovery

2009-11-19T16:54:00.004-05:00

Don't believe the impatient fear mongers. A slow, but steady, recovery is in process. From Bloomberg:

The U.S. economic recovery will extend into next year as manufacturing expands and the pace of firings abates, reports today indicated.

The Conference Board’s index of leading indicators, a gauge of the outlook for the next three to six months, rose 0.3 percent in October, preserving a string of gains that began in April. Other reports showed claims for jobless benefits held at a 10-month low and Philadelphia-area manufacturing accelerated.

The rally in stock prices, low short-term interest rates and slowing job losses that propelled the leading index signal consumer confidence and spending are likely to stabilize, limiting the risk the economy will retrench. The data supported Treasury Secretary Timothy Geithner’s forecast today that the emerging expansion will be sustained into 2010.

“It’s very clear that the economy is now expanding, but I don’t see it being a vigorous expansion,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York, who correctly forecast the leading index. “We are seeing a gradual improvement, but the key word is ‘gradual.’”

Why eminent domain should be used sparingly

2009-11-14T19:30:00.000-05:00

This is karma:

The private homes that New London, Conn., took away from Suzette Kelo and her neighbors have been torn down. Their former site is a wasteland of fields of weeds, a monument to the power of eminent domain.

But now Pfizer, the drug company whose neighboring research facility had been the original cause of the homes' seizure, has just announced that it is closing up shop in New London.

To lure those jobs to New London a decade ago, the local government promised to demolish the older residential neighborhood adjacent to the land Pfizer was buying for next-to-nothing. Suzette Kelo fought the taking to the Supreme Court, and lost. Five justices found this redevelopment met the constitutional hurdle of "public use." ...

Scott Bullock, Kelo's co-counsel in the case, told me: "This shows the folly of these redevelopment projects that use massive taxpayer subsidies and other forms of corporate welfare and abuse eminent domain."

The City of New London forcibly took people's homes away from them and got what in return? A field of weeds and jobs that are gone in a decade? Screw the City of New London.